Definitely need to look at it on a company specific basis. The correlation depends on a lot of different variables, and will be very different for different enterprises. My advice is look at a reasonable estimate of 'through the cycle' earnings, and base your judgement of value on that.

The following is part of an article published this morning by Greg Peel at FNArena.com (part of their "overnight report"): By Greg Peel Oil Wars It had been anticipated that were Russia not to agree to OPEC’s proposed additional production cuts of -1.5mbpd the oil price would plunge, and indeed it did on Friday night by -10%. What no one saw coming was Saudi Arabia’s response. If Russia is going to go it alone, so is Saudi Arabia. OPEC and Russia got together to agree on production cuts after the oil shock of 2016, which was driven by the spike in US shale production. Those production cuts had held ever since, right up until Friday when further cuts were proposed by OPEC. When Russia said no, not only did this imply the additional cuts would not occur but that the prior cuts are now out the window. The agreement expires on April 1. Saudi Arabia will now fight on volume over price. One might assume OPEC is dead in the water. Russia, it is assumed, has become fed up with carrying the can and wants to break the US shale industry. The Saudis don’t want to have to carry the can alone. The Saudis can produce oil at a cost of US$20/bbl. For Russia it’s more like US$40/bbl. For marginal US shale producers, the cut-off is above US$45/bbl. Saudi Arabia’s and Russia’s oil industries are state-owned (the Aramco float is negligible) and both carry large cash war chests for just such a development. The US oil industry is free market, and for many smaller operations, heavily leveraged. The Fallout I LNG export prices are indexed to the crude oil price. The most leveraged of Australia’s big oil & gas producers is Oil Search ((OSH)), hence yesterday it fell -35%. There followed Santos ((STO)) on -27%, energy industry contractors NRW Holdings ((NWH)) and Worley ((WOR)), with -20% drops, and Beach Energy’s ((BPT)) -19% rounded out the top five ASX200 losers. Australia’s biggest O&G company by a margin, Woodside Petroleum ((WPL)), fell -18%. The energy sector fell -20%. All other sectors fell in a distinct range from defensive to cyclical. Utilities fared best with a -2.1% fall. Materials came in behind energy with -9.5%, which is interesting given the amount of fiscal stimulus about to hit the planet, but we recall BHP Group ((BHP)) is also an oil producer, and it fell -14%. Rival Rio Tinto ((RIO)) which is not in oil, fell only -6%. The IT sector took bronze with -9.0% and then we drop down to the banks on -7.6%. Another RBA rate cut in April is now considered a given, and NAB economists are predicting QE by May. The risk of a recession is now also heightened, which could break the long run of benign bad and doubtful debts levels for the banks. All other sectors fell by diminishing amounts by level of defensiveness. To underscore the widespread nature of the selling yesterday, the ASX200 top five leaders’ board only had three stocks on it, because only three of two hundred closed in the green. Fisher & Paykal Healthcare ((FPH)) recently upgraded guidance due to virus-driven demand for its medical products in China. It rose 3.0%. Newcrest Mining ((NCM)) gained 2.5% as gold held its ground, while utility infrastructure company Spark Infrastructure ((SKI)) rose 0.5%. The ASX200 fell -7.3% yesterday ahead of the S&P500 falling -7.6% overnight. One would assume, thus, that we got in first and another big drop in response to Wall Street would be double-counting. Our futures are down -273 points this morning. The Fallout II The world has seen many oil shocks over the years, either demand-driven, such as the airline shutdown following 9/11, or supply-driven, such as the OPEC shocks of the 1970s and more recently the US shale explosion of 2016. But last night oil industry veterans could not recall oil markets suffering a simultaneous hit on both sides. Typically a big fall in the oil price would lead to buying elsewhere in those sectors that benefit, such as airlines and transport, for which oil is the primary cost, through to consumer discretionary, which benefits from more money in consumer pockets. But last night everything was trashed on Wall Street. Lower oil prices are no comfort, at least not yet, to US transport companies when no container ships are arriving from China. There’s no comfort for airlines when their planes are grounded and no one’s flying. If retailer shelves are emptying due to factory shutdowns in China, there’s nothing to buy, even if consumers felt it a good time to do so, which given recession talk, they probably don’t. When Wall Street opened last night trading was only ten minutes in when it shut down again. The -7% circuit breaker was tripped, halting trade for five minutes. It worked, to the extent that the market calmed down. I’d wager that the computers were confused by a circuit breaker – many being too young to recall the last one (GFC) – hence from thereon trading was described as “orderly”, despite the Dow ultimately closing down over -2000 points. When Wall Street was halted, the US ten-year bond yield was hitting 0.32%. That was a -39 basis point fall. The yield quickly rebounded, presumably as investors sold bonds to cover stock losses, and ultimately the ten-year closed down -21 points at 0.50%. While the energy sector was clearly the worst performer on the day, the banks were close behind. There’s not a lot of earnings upside when the cash rate’s 1.0% and ten year’s out is 0.5%. But there is also the small issue of smaller US oil companies being highly leveraged. While the US majors have minimal loan exposure to the industry, some smaller regional banks are heavily exposed. Long before the virus even appeared, the greatest level of concern in US credit markets was reserved for oil companies. Putin knows that. Only a handful of S&P500 companies closed in the green last night. Smaller oil companies fell as much as -50% in the session. Only one Dow stock closed in the green – Walmart, seller of toilet paper. And right now, everyone’s ______ themselves. -------------- end of excerpt --- but there is more available on FNArena.com ------ I note that despite a very significant drop in the oil price overnight, Australia's energy companies are now actually up today, with COE up the most at midday (+7.3%), with BPT up 5.5% and WPL up 4%. Perhaps yesterday's sell-off was overdone? Regarding the winners and losers argument. Unfortunately, due to COVID-19, the winners from a lower oil price have their own problems. For example - Airlines are big winners from cheaper aviation fuel, but COVID-19 hurts them more than most. Due to the fallout and fear surrounding this coronavirus epidemic that has expanded further and faster than many had anticipated, the silver linings can be hard to identify for many. For myself, I consider this as a great buying opportunity. However, I certainly understand that it may - and probably will - get worse before it gets better. The question then is when do you go "all-in" (fully invested) in times of such opportunity? Everyone will have to work that out for themselves. I think those that are fully invested today (and I'm very close) will do well in 1, 2 and 3 years' time. A bear market might ruin that 1 or 2 year forecast, but looking out to 3 to 5 years, I think these prices are going to look pretty good in hindsight. That doesn't mean things won't get even cheaper first however.